Nasdaq NDAQ recently unveiled plans to tighten delisting regulations for companies falling short of listing standards. This move, aimed at penny stocks, signals potential removal of struggling firms from the exchange.

Reportedly, Nasdaq mandates companies to sustain a minimum bid price of $1 to maintain listing compliance. Failure to meet this criterion for 30 consecutive trading days renders a company non-compliant, triggering a 180-day rectification period. If compliance isn’t met within this timeframe, companies may seek an additional 180-day extension.

Under the proposed changes, firms whose share price dips below $1 for 360 market sessions face suspension without further recourse. Moreover, entities executing a reverse stock split within a year of falling below $1 risk immediate delisting. Elevating listing standards could enhance the calibre of small-capitalization companies, showcasing only the most robust businesses and potentially lifting the Russell 2000 index.

Last month witnessed an upsurge in lesser-known entities, buoyed by a shift away from large caps, notably evident in the Big Tech sector. This trend underlines the prominence of promising small-cap stocks amidst market dynamics.

The Leveraged ETFs

For investors navigating this market rotation, Direxion offers two leveraged exchange-traded funds. The Direxion Daily Small Cap Bull 3X Shares TNA aims to replicate 300% of the Russell 2000’s daily performance. In contrast, the Direxion Daily Small Cap Bear 3X Shares TZA offers a 300% inverse performance.

It’s crucial to note that these ETFs present speculative opportunities for short-term trading, given the daily compounding of leverage and the heightened volatility in small-cap stocks. Sustained holding of leveraged ETFs, especially 3X funds, may incur value decay over time.

Performance Overview: TNA

Recent market fluctuations saw TNA soar to a peak of $49.09 in the past month, before settling around $37 presently.

• Although TNA dipped below its 200-day moving average earlier this week, subsequent price movements propelled the ETF above this pivotal indicator of market health.
• Optimistically, TNA bulls aim to consolidate support at $38 and target the psychological barrier at $40 as the next milestone.

Performance Overview: TZA

Similarly, TZA witnessed significant volatility, plummeting to $13.51 before rebounding to around $17.

• TZA notably fell below both its 50-day moving average and 20-day exponential moving average, struggling to surpass the former.
• With an eye on the $18 support level, small-cap bearish investors seek to breach the $20 psychological threshold.

Image credits: Mohamed Hassan from Pixabay